Board of Commissioners Meetings

City of Henderson, Kentucky NOTICE OF SPECIAL CALLED JOINT WORK SESSION Tuesday, February 1, 2022 January 28, 2022 Commissioner Robert N. Pmitt Commissioner Bradley S. Staton Commissioner Rodney Thomas Cornmissioner Austin P. Vowels Dear Board Members: As a result of the state of emergency declared by the President of the United States, the Governor of Kentucky, due to the global COVID-19 pandemic, and in accordance with recommended precautions related to COVID-19, the following Meeting Notice is issued: Please take notice that as Mayor of the City of Henderson, Kentucky, I hereby call a special called work session of the Board of Cornrnissioners to be conducted jointly with Henderson Water & Sewer Commission to be held on Tuesday, February 1, 2022, at 5:00 p.m., in the third-floor assembly room, 222 First Street, Henderson, Kentucky. One or more members of the Board of Commissioners may participate via Zoom and the meeting will be broadcast to the public. The meeting will be broadcast live on Zoom (call in number/webinar ID-1312 626 6799 / 889 8526 4546 Password: 8311200) or https://us02web.zoom.us/j/88985264546 Password: 8311200; live streamed on the city's website: https://www.cityofhendersonky.org/CivicMedia; Facebook and Twitter. This work session will be conducted as a video teleconference meeting as allowed under KRS61.826. Any interruption in the video or audio broadcast at any location shall result in the suspension of the meeting until the broadcast is restored. The purpose of this called work session is for the following: AGENDA 1. Roll Call 2. Review of HWU Capital Projects 3. Discussion of HWU PILOT 4. Adj ournment Respectfully, Steve Austin, Mayor This meeting will be conducted as a video teleconference meeting as allowed under KRS61 .826. Any interruption in the video or audio broadcast at any 1ocation shall result in the suspension of the meeting until the broadcast is restored.  City of Henderson, Kentucky A copy of the foregoing notice received, and service thereof waived this 1s' day of Febmary 2022. Commissioner Robert N. Pmitt Cornmissioner Bradley S. Staton Comrnissioner Rodney Thomas Cornmissioner Austin P. Vowels  City Commission Memorandum 22-16 January 28, 2022 TO: Mayor Steve Austin and the Board of Commissioners FROM: William L. "Buzzy? Newman, Jr., City Manager i,)eA:] SUBJECT: Called Joint City/Water & Sewer Commission Work Session Agenda A special called joint City/Water & Sewer Commission work session is scheduled for 5:00 p.m. on Tuesday, February 1, 2022, in the 3rd Floor Assembly Room of the Municipal Center. Items on the agenda for review will be: Henderson Water Utility Upcoming Capital Projects & Funding Mr. Tom Williams, Henderson Water Utility General Manager, and staff members will be in attendance for discussion and review of upcoming Henderson Water Utility capital projects, their estimated costs and how to fund these projects. Discussion of Utility Payment In Lieu of Taxes (PILOT) Mr. Robert Gunter, Finance Director, will be in attendance for review and discussion relating to the Payment In Lieu Of Taxes (PILOT) program from city owned utilities. This program has been inconsistent over the years and the proposed new rates could be phased in over a two-year or a three-year period. c: Tom Williams Robert Gunter  FINANCE DEPARTMENT MEMORANDUM 22-01 January 28, 2022 TO: William Newrnan, Jr., City Manager 5?u FROM: Robert Gunter, Finance Director SUBJECT: Payment In Lieu Of Taxes (PILOT) As requested, I have calculated the estimates for a 5o/o PILOT for all three utilities. I have taken the proposal from Commissioner Staton and modified it a tiny bit. There was a lot of discussion concerning this topic during the proposed sale of HMP&L to Big Rivers Electric Co-Op last summer. The focus was on a study by the American Public Power Association that stated public power utilities contributed 5.4oA of electric operating revenues back to the communities they serve. I have attached the study and it can also be found here: https://www.publicpower.org/system/files/documents/Public-Power-Pays- Back-2020-update.pdf My estimates are based on the audited 2021 financial statements for all three utilities. Both the 2-year and 3-year phase-ills split the increase evenly over the phase-in period which means the annual percentage would be different for each utility until the 5% is reached. Please understand that these are just estimates and the actual PILOT will depend on several variables including weather, customer base, and economic conditions. The flow of the PILOT will fluctuate each month based on the sales each month and will not be a uniformed monthly amount as it is now. That should benefit the utilities and not create any isSues with the City. ?<i'r ,A Robert Gunter  PILOT PROGRAM PROPOSAL 2-YEAR PHASE-IN A. Obiective Develop a PILOT Program that is fair and consistent with consideration of the utilities financial position and within industry standards for public utilities. Currently, PILOT payments made by each utility are fixed without consideration for a basis. B. Present Pilot Payment: Utility Approximate Cash PILOT % of AOR Annual Revenue HMP&L $41,213,000 $1,244,724 3.02% HWU $24,903,000 $550,000 2.20o/o HMG $14,100,000 $1,400,000 9.92% TOTAL $80,216,000 $3,194,724 3.98% *AOR=Annual Operating Revenue Proposed Pilot Payment: Utility Approximate Cash PILOT % of AOR Annual Revenue HMP&L $41,213,000 $2,060,000 5.OO% HWU $24,903 ,ooo $1,245,000 5.OO% HMG $14,100,000 $705,000 5.OO% TOTAL $80,216,000 $4,010,000 5.OO% Analysis: This represents an annual increase in PILOT payments of $815,276. This represents an annual increase for HMP&L of $815,276. This represents an amiual increase for HW[?J of $695,000. This represents an annual decrease for HMG of $695,000. C. In consideration of the increase/decrease of payments, the City is proposing a 2 year roll out plan. Utility % of AOR Year l oA of AOR Year 2 HMP&L 4.O% $1,652,000 5.O% $2,060,000 HWU 3.6% $897,000 5.O% $1,245,000 HMG 7.5% $1,053,000 5.O% $705,000 TOTAL $3,602,000 $4,010,000 Page 1 of 2 Base starting point was nearly $3,1 94,724 in total PILOT cash payments. Increase of $407,276 in year one. Increase of $408,000 in year two. Total of $815,276 These figures are based on 2021 Year-End Operating Revenues. The amount paid each year will vary based on various factors including weather, economic conditions, addition/deletion of large industrial customers and makeup of the customer base. As rate-increases are adopted by the Board, the PILOT will increase. Page 2 of 2  PILOT PROGRAM 3-YEAR PHASE-IN A. Obiective Develop a PILOT Program that is fair and consistent with consideration of the utilities financial position and within industry standards for public utilities. Currently, PILOT payments made by each utility are fixed without consideration for a basis. B. Present Pilot Payment: Utility Approximate Cash PILOT oA of AOR Annual Revenue HMP&L $41,213 ,000 $1,244,724 3.02% HWU $24,903 ,000 $550,000 2.20% HMG $14,100,000 $1,400,000 9.92o/o TOTAL $80,216,000 $3,194,724 3.98% *AOR=Annual Operating Revenue Proposed Pilot Payment: Utility Approximate Cash PILOT % of AOR Annual Revenue HMP&L $41,213,000 $2,060,000 5.OO% HWU $24,903 ,000 $1,245,000 5.OO% HMG $14,100,000 $705,000 5.OO% TOTAL $80,216,000 $4,010,000 5.OO% Analysis: This represents an annual increase in PILOT payments of $815,276. This represents an annual increase for HMP&L of $815,276. This represents an annual increase for HWU of $695,000. This represents an annual decrease for HMG of $695,000. C. In consideration of the increase/decrease of payments, the City is proposing a 3 year roll out plan. Utility % of Year 1 %of Year 2 % of Year 3 AOR AOR AOR HMP&L 3.67% $1,516,500 4.33% $1,788,000 5.O% $2,060,000 HWU 3.14% $782,000 4.06% $1,013,000 5.O% $1,245,000 HMG 8.28o/o $1,167,500 6.64% $937,000 5.O% $705,000 TOTAL $3,466,000 $3,738,000 $4,010,000 Page 1 of 2 Base starting point was nearly $3,1 94,724 in total PILOT cash payments. Increase of $271,276 in year one. Increase of $272,000 in year two. Increase of $272,000 in year three. Total of $815,276 These figures are based on 2021 Year-End Operating Revenues. The amount paid each year will vary based on various factors including weather, economic conditions, addition/deletion of large industrial customers and makeup of the customer base. As rate-increases are adopted by the Board, the PILOT will increase. Page 2 of 2  PublicPower Pays Back Payments and Contributions by PubLic Power Utilities to State and Local Governments in 2018 ;,S % d) r L a a ;!=;, (( % ? ) AMERICAN ffi [? A410rlATION 8o Yeays of Powering Strong Communi}ies  Public Power Pays Back Payments and Contributions by Public Power Utilities to State and Local Governments in 2018 Prepared by Paul Zummo, Director, Policy Research and Analysis Arnerican Public Power Association PUBLISHED MAY 2020 AMERICAN ffi [? ASSOCIATION 8o Years of Powering Strong Communities The Arnerican Public Power Association is the voice of not-for-profit, community-owned utilities that power 2,000 towns and cities nationwide. We represent public power before the federal government to protect the interests of the more than 49 million people that public power utilities serve, and the 93 ,000 people they employ. o'- 2020 American Public Power Association www.PublicPower.org Contact MediaRelations@PublicPower.org or 202-467-2900 Executive Summary Public power utilities provide affordable, reliable, and Many communities are not fully aware of the total value of environmentally responsible electricity to the customers they contributions made by their public power utilities. Some serve. These community-owned utilities are not beholden to utilities do not quantify all their payments and contributions. any shareholders and are driven only by the mission to serve To get a more accurate estimate, APPA conducted a detailed their customers and their community. survey of public power utilities. This report presents the results of this survey, and includes: In addition to providing affordable electricity, public power utilities prov'de a direct benefit to their communities in m Summaries by revenue size, class, and region of the the form of payments and contribui'ons to state and local country for public power and investor-owned utilities government. These contributions come in many forms - W Common types of payments and contributions property-like taxes, payments in lieu of taxes, transfers to the M Typical methods utilities used to calculate the amount of general fund, and free or reduced cost services provided to payments in lieu of taxes or transfers to the city general states and cities. The total value of these contributions is not fund always recognized. Use caution in making direct comparisons with our previous In 2018, public power utilities contributed 5.4% of reports (published every two years), as the utilities included in elec!ric operating revenues back to the communities each report can change from year to year. they serve, according to an American Public Power Association study of 136 public power utilities. In comparison, investor-owned utilities paid a median of 4.8% of electric operating revenues in taxes and fees to state and local governments in 2018. When all 2018 taxes, tax equivalents, and other contributions to state and Iocal government are considered, the contribution of public power utilities - as a percentage of electric operating revenues is 13% higher than that of investor- owned utilities. Payment and Contribution Rates by Revenue Class Net payments and contributions as a percent of elect'c Table 1. Net Payments and Contributions by Public operating revenue are summarized for public power utilities Power Utilities as Percent of Electric Operating Revenue, 2018 in seven revenue classes. Medians by revenue class range from 4.5% to 6.2%, as compared to the national median of 5.4%. Revenue Number First Third (in millions) of Utilities Median Quartile Quartile The median is defined as tl?ie value where half of the utilities Less than $10 28 4.5 3.4 5.9 had greater payment and contribution rates, and half contributed less. $10-$20 17 5.2 2.7 8.4 $20-$50 47 4.7 3.5 6.4 Quartiles are another common tool used in analysis. By definition, half of utilities fall between the first and third $50-$100 17 5.7 2.9 6.3 quartiles. For example, 50o/o of the 136 utilities in this report $1 00 or more 32 6.2 5.1 9.3 made payments and contributions between 3 .5% and 6.9% of TOTAL 136 5.4 3.5 6.9 electric operaung revenue. Figure 1. Median Net Payments and Contributions by Public Power Utilities as Percent of Electric Operating Revenue, 2018 9% 8% 7% 6,2 %i 6% 5.7% ? 5% 5.2% m n 4T5'o 4.7% 4% n n 3% 2% 1% 0% Less $io - $20 $20 - $so $so - $too $l00or than $10 more Revenue Class ( in millions of dollars) Public Power Pays Back s  Payment and Contribution Rates by Region Regional variations in median net payments and contributions range from l .8% in the Northeast to 6.4% in the Atlantic and East South Cen(ral. Regions are defined in Appendix 2. Table 2. Net Payments and Contributions by Public Power Utilities as Percent of Electric Operating Revenue, 2018 Number First Third Region of Utilities Median Quartile Quartile Norkheast 8 1.8 Atlantic 9 6.4 2.9 13.1 East Norkh Central 26 5.1 3.8 6.4 East South Central 17 6.4 5.7 8.3 West North Central 44 4.1 3.5 6.2 West South Central 13 6.1 3.4 114 Mountain 4 Pacific Northwest 7 6.3 Pacific Southwest 8 4.0 TOTAL 136 5.4 3.5 6.9 ' Quanues not provided for fesver than 9 responses " " Medians not provided for fewer than s responses Figure 2. Median Net Payments and Contributions by Public Power Utilities, as percent of Electric Operating Revenue, 2018 9% 8% 7% 6'.4% 6.4% 6.3% 6% ri s 6.1% w 5% * 5.1% i l l 'i l l 4% i * t !!%ll i s 3% i s t l l i s s 2% * s i s i s s s * s i s i s s 1% l l s i s l s l s s 0% NE ATL ENC ESC WNC WSC PNW PSW Region 6 Public Power Pays Back In 2018, investor-owned distribution utilities paid a median The median rate for investor-owned systems was the largest in of 4.8% of electric operating revenues in taxes and fees to the Northeast and Pacific Norihwesi, and smallest in the East state and local governments. Utilities in the middle 50% of South Central and Pacific Southwest. T;able 3 presems data contributioi's made payments ranging from 3.3% to 7.l%. grouped by geographic region for investor-owned utilities. In comparison, public power utilii'es paid a median of 5.4% in net payments and contributions as a percent of electric Table 3. Net Taxes as Percent of Electric Operating operating revenue, with a middle range of 3.5% to 6.9%. Revenue, Investor-Owned Utilities, 2018 Number of First Third In this study, most IOUs (93%) had more than $100 Region Utilities Median Quartile Quartile million in operating revenues, while most public Northeast 27 6.3% 4.8% 7.9% power systems had Iess than $100 million (83%). Atlantic 18 4.6% 3.5% 8.1% The median percent of taxes paid by IOUs and tax payments East North Central 26 4.3% 2.9% 6.O% and contributions by public power systems as a percentage of East South Central 7 6.5% electric operating revenue varies by utility size. West Nor}h Central 14 4.7% 4.1% 5.6% Investor-Owned Public Povver West South Central 10 5.O% 3.5% 5.5% Large Utilities (over $1 00 million) 4.8% 6.2% Mountain 4 NA NA NA Small Utilities (under $1 00 million) 4.8% 4.8% Pacific Northwest 6 6.2% Pacific Southwest 8 3.1% TOTAL 120 4.8% 3.3% 7.1% " Quartues not provided for fewer than 9 responses Figure 3. Median Tax Payments by Investor-Owned Utilities, as Percent of Electric Operating Revenue, 2018 9% 8% 7% ??? 6.3% 655i r* ri 6? 6% I?l 5% s s ,l J - 4.7% 5A mm 4% s ' 4.6 % ,i3g .m s sT i 3% s * s s s s i 2% s * s s s s t s 1% s * s s s s i s 0% s s i s s s i s NE ATL ENC ESC WNC WSC PNW PSW Region Public Power Pays Back 7  Summary of Payments and Contributions The data in this report come from a survey APPA sent to The number of ui'lities mak'ng each type of payment or all public power utilities. The next two sections summarize contribution is detailed in Table s. results for 125 public power utilities that completed the survey. Table s. Types of Payments & Contributions, 2018 Percentage Number The data excludes 11 utilities that completed the survey, of Utilities of but which must limit payments and contributions under the Surveyed Utilities temis of their wholesale power contract with the Tennessee 1. Payments & Contributions PROVIDED Valley Authority. Payments in Lieu of Taxes 84.0% 105 The 125 utilities combined made over $776 million in total Taxes and Fees 42.4% ss Gross Receipts Tax 21.6% 27 payments and contributions to state and local government State Public Utility Assessments 17.6% 22 in 2018. Payrnents in lieu of taxes were the largest share of Franchise Fees 9.6% 12 payments and contributions, followed by other taxes and fees. Proper}y Taxes 16.8% 21 Other 1 0.4% 13 Table 4. Net Payments and Contributions to State and Free or Reduced Cost Electric Seryice 38.4% 48 Local Government Streetlighting 32.O% 40 Amount Percent ughting for Municipal Buildings 1 8.4% 23 (in millions) ofTotal Raffic Signals 1 6.O% 20 Recreational Facilities 1 6.0% 20 Payments in Lieu of Taxes $594.5 76.8% Water or Sewer Treatment Facilities 9.6% 12 Other Taxes and Fees $68.3 8.8% Water Pumping 9.6% 12 Other 1 4.4% 18 Gross Receipts Tax $64.1 8.3% Use of Employees 47.2% 59 Free or Reduced Cost Electnc Services $40.7 5.2% Installation of Temporary ughting 20.8% 26 Use of Employees $6.0 0.8% Putting Up City Signs & Banners 26.4% 33 Electrical Repair for Other Deparkments 1 9.2% 24 Other, including Equipment and Materials $3.0 0.4% Tramc Signal Maintenance 1 5.2% 19 TOTAL $776.6 100.0% Tree Trimming for Other Departments 1 8.4% 23 OtherServices 17.6% 22 Non-UtilityLocates 7.2% 9 Less: Services and Contributions TechnicalExpertise 5.6% 7 RECEIVED by the Utility FROM Rewiring Municipal Buildings 5.6% 7 the Municipality ?1 Reading Water Meters 6.4% 8 Net Payments & Contributions $774.1 OtherResources 31.2% 39 Use of Vehicles & Equipment 24.O% 30 Use of Materials & Supplies 11 .2% 14 Other 10.4% 13 11. Services & Contributions RECEIVED 17.6% 22 Free or Reduced Cost Service 5.6% 7 Use of Vehicles & Equipment 8.O% 10 Use of Materials & Supplies 3.2% 4 UseofEmployees 10.4% 13 ' The 125 urilities receiveA $2 .5 rnulion in contributior+s and services from the municipality. This amount does not include any contributions or services for which +he city has been reimbursed, either through direct buling or a transfer of funds. Free or reduced cost oE'nce space and 'svater are the major seriAces provided, whtle operations and maintenance, legal ser'Aces, information technology ser=Aces, engineering sersAces and financial service employees are +he predominam type of employee contributions received by the utinty. The $2.5 million in free or reduced cost contributions and services provided by the municipanty to the utility is subtracted from the $776.6 mulion in payments and contributions from the utility to state and local govem'ment. The'result is $774. l million in net payments and contributions by the 115 utilities in 2018. 8 Public Power Pays Back  Methods Used to Determine Payments in Lieu of Taxes Payrnents in lieu of taxes are generally thought of as payments to local government. However, some utilities make payments in lieu of taxes to the state government. Of the 125 utilities induded in the survey analysis, more than 84% (105 utilities) made payments in lieu of taxes, also called transfers to the general fund. The most common method used to determine the amount of payments in lieu of taxes was percent of gross electric operating revenue, as shown in Table 6. The median transfer as a percent of electric operating revenue was 4.Oo/o. Table 6. Methods Used to Calculate Payments in Lieu of Taxes Percentage of Number Utilities of Utilities Percent of Gross Electric Operating Revenue 33% 35 Property Tax Equivalent 17% 18 Flat Amount Paid Annually 14% 15 Charge per Kilowatt-hour Sold 10% 11 Assessment of Electric Utility and City Budgets 7% 7 Percent of Net Utility Plant in Service 3% 3 Percentoflncome(Net,OperatingorTotal) 1% 1 Other/Did Not Indicate 14% 15 The category "assessment of electric utility and city budgets" includes utilities with payments that are set by the city council, the mayor, or a utility commission, and utilities that make payments on an as-needed basis. The most common responses in the "other" category are utilities which make payments are based on more than one criterion. Tennessee Valley Authority distribution utilities are not included in the data above. State law detemiines the payments in lieu of taxes for utilities in the state of Tennessee. The calculation is composed of two parts - percentage of three-year average operating revenue less power cost, and property tax rate applied to net utility plant. Public Power Pays Back g  APPENDIX 1 Methodology and Data Sources Results for publicly owned utilities were calculated from Public power's payments and contributions to state and two sources: data collected on the American Public Power local governments include taxes and fees such as gross Association's "2018 Survey of Local Publicly Owned Electric receipts taxes, property taxes (generally on property outside Utilities Tax Payments and Contributions to State and the city limits), franchise fees, payments to state public Local Govemment," and data submitted by public power utility commissions, environmental fees, and licenses. Also utilities to the Depanment of Energy's Energy Infoimation included are payments in lieu of taxes or transfers to the Administration on Fomi EIA-861, 'Annual Electric Utility general fund and the value of services such as free or reduced Report." cost electricity, the use of electric department employees, and the use of electric deparmient materials and equipment. A total of 136 utilities completed the 2018 survey. Fomi Federal taxes, social security taxes, similar contributions to EIA-861 provided information on electric operating revenue. state unemployment insurance, and other payroll taxes are Payrnents and contributions for TVA dist'butors include excluded. an amount equal to s % of the estimated cost of power purchased from TVA (TVA makes this payment) plus any The value of free or reduced cost services contributed by payments in lieu of taxes or contributions made by the the local government to the utility is deducted from total distribution utility. TVA's wholesale power contracts with payments and conti'butions to arrive at net contributions. municipalities limit payments in lieu of taxes to an amount The net amount is then divided by elect'c utility revenue. not exceeding the state and local taxes that the system would pay if privately owned. Net taxes for investor-owned utilities include state and local taxes and fees as reported on pages 262-263 of FERC Form Smdy results for investor-owned systems were calculated 1. Federal taxes, social security taxes, similar contributions to from data submitted on the 2018 Federal Energy Regulatory state unemployment insurance, and other payroll taxes are Commission Forrn 1, 'Annual Report of Major Electric excluded. Utilities, Licensees and Others." This report includes only distribution utilities that are defined as those w'th approximately 50% or more of their total kilowatt-hour sales going to retail customers. The investor- owned systems included in this report comprise 95% of all full-service kilowatt-hour sales to customers of investor-owned utilities, and the public power utilities included provide 21% of all k'lowatt-hour sales to customers of public power utilities. 10 Public Power Pays Back APPENDIX2 Regions The regions specified in Table 2 and Table 3 comprise the follow'ng states. Hawaii is not included in any of the nine regions, but is included in national totals and in summaries by revenue class. Utilities serving the U.S. territories did not complete the survey and are not included in this report. Noitheast Connecticut, Maine, Massachusetts, New Hampshire, New ,Jersey, New York, Pennsylvania, Rhode Island, and Vermont Atlantic The District of Columbia, Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and West Virginia East North Central lllinois, lndiana, Michigan, Ohio, and Wisconsin East South Central Alabama, Kentucky, Mississippi, and Tennessee West North Central lowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota West South Central Arkansas, Louisiana, Oklahoma, and Texas Mountain Colorado, Montana, New Mexico, Utah, and Wyoming Pacific Northwest Alaska, ldaho, Oregon, and Washington Pacific Southwest Arizona. California, and Nevada Public Power Pays Back 11  AMERICAN fl ffi ASSOCIATION 8o Yeays of Powering Strong Communi}ies 2451 Crystal Drive Suite 1000 Arlington, Virginia 22202-4803